In his presentation Thursday, Klapwijk advised that mine production is expected to grow another 4% this year.

ABOVE-GROUND STOCKS
Net silver supply from above-ground stocks fell by 14% to 278.9 million ounces in 2011.
"The decline was a result of considerably lower net producer hedging and a major decline in government sales," the survey noted. "Net government sales of silver fell by a hefty 74% to a 14-year low of 11.5 Moz, driven by a sharp decline in disposals from Russia."
Total government silver stocks were conservatively estimated at 97 million ounces at year-end 2011.
"Government sales are difficult to predict," Klapwijk noted, "opportunistic sales could emerge on any price rallies."
Producers were net hedgers of silver in 2011, adding 10.7 million ounces or 334 tonnes of supply. At end-2011, Klapwijk said the delta-adjusted silver hedge book stood at 94.7 million ounces. New hedging was dominated by companies for whom silver is a by-product including Barrick, KGHM, Minera Frisco, Minera Volcan and Industrias Peñoles, according to the survey.
"Net producer hedging is forecast to remain a net supplier of metal to the market this year, although at a lower level than 2011," Klapwijk remarked.
Global scrap supply rose 12% to a new record total of 256.7 million ounces in 2011, largely attributed to growth in U.S. recycling along with broad-based gains in Europe. Klapwijk said scrap supply this year is predicted to remain broadly flat "as structural losses in photographic recycling outweigh gains from all other categories."

SILVER BULLION
World physical silver bar investment grew by 67% to 95.7 million ounces last year.
Indian silver bullion imports rose by over a third to 130 million ounces in 2011, while net UK bullion imports slumped almost 80% and net Italian bullion imports plunged almost 90%. "Weak industrial demand led to a drop in bullion imports across much of East Asia," the survey said. "Singapore was the only country to see its receipts grow."
However, U.S. silver bullion imports rose by 12% to an estimated 207.8 million ounces last year, "comfortably the highest total in our 22-year data series; this followed on from a (then) record high the previous year."

FABRICATION DEMAND
World silver fabrication demand dropped by 13.5 million ounces to 876.6 million ounces last year, but still posted the third-highest total on record.
"Every category of silver off take declined in 2011, with the exception of coin minting which saw a new record high," said the survey.

The 3% decline in industrial fabrication demand to 486.5 million ounces in 2011 was attributed to a sharp fall in fourth quality activity, offsetting a strong first half. "Losses were mainly incurred in the United States and Japan, while China saw a modest rise," the report noted.

"High prices and weak economic growth contributed to the 4.5% fall in jewelry, in spite of substitution away from gold in many markets," said Thomson Reuters GFMS. Jewelry demand declined from 167.4 million ounces in 2010 to 159.8 million ounces in 2011.

Coin minting shone brightest among fabrication demand last year, jumping by 18.9% in 2011 from 99.4 million ounces in 2010 to 118.2 million ounces, its highest total in Thomson Reuters 22-years of data, led by strong bullion coin demand in the U.S. and western Europe.
In his presentation, Klapwijk said, "Industrial demand is expected rebound in 2012, with total volumes likely to hit a fresh all-time high." Total fabrication demand this year is predicted to rise by 3%-5% to around 900 million ounces.

Silver world investment (including implied net investment, silver bars and coins and medals) produced a historic high total last year of 282.2 million ounces, the equivalent of approximately US$10 billion on a net basis, another record high.

By year-end 2011, silver ETFs and physically backed Canadian funds declined 4% or 24.2 million ounces to 576.1 million ounces.